What Every Developer and Owner Should Examine in a Lien Notice
This alert is the first of a three part series intended to help developers and owners evaluate and address liens against their property.
An owner or developer is served with a mechanics' lien notice. Because mechanics' liens are a statutory construction, they are only valid if the lien claimant complies with the letter of the mechanics' lien law as to the content and timing of the filing of the notice. Here's what every notice must contain — look for these as soon as you receive a notice.
- Full name and address of the claimant. This is required by Indiana law. Failure to include this information can invalidate the lien. Furthermore, the lien must be filed by the proper party. For instance, if a parent attempts to record a lien on behalf of a claim by a subsidiary, the lien is invalid in most instances.
- Amount of money being claimed. Incredibly, some lien claimants fail to list an amount of money being claimed. Failure to list some amount can be fatal to a lien claim. However, if some amount is listed, a lien can attach even if it is ultimately determined that the lien claimant is not entitled to all of the amount listed in the lien.
- Property owner's proper legal name as its appears in the County recorder's office. As with the claimant, the lien must be named against the proper party in interest. Listing a party — even an affiliate — differently than the way the entity appears in the County recorder's office can render purported lien notice invalid.
- Property owner's proper address as listed in the County recorder's office. This address can be different than the address of the property to be liened. A defect here can be fatal to a lien.
- Proper legal description of the property to be liened. A proper legal description is required by Indiana law and essential for putting third parties on notice of the lien on the real estate. For this reason, a legal description that describes a different piece of property than the property on which the work giving rise to the lien claim arose is fatal to a lien claim. Similarly, a lien notice can be invalid if it contains a legal description of property that contains more than the property that could be liened. For example, developments that consist of different and independent lots cannot be cumulatively liened if the work relating to the lien was limited to just one lot. A lien that purports to do so is invalid.
- Substantiation that the purported lienholder performed work on the project within the 90-day period (for commercial properties) or 60-day period (for certain residential properties) immediately preceding recording of the lien notice. A lien claimant cannot extend this time by performing work incidental to the contract or by entering into a new contract for separate work. Moreover, a lien claimant cannot cure defects in the lien notice after the 90-day or 60-day deadline runs, meaning, if the lien notice is defective for any reason listed here, no lien can attach after the recording deadline passes.
- Confirmation that claimant performed on-site labor or supply materials to contractor or subcontractor performing on-site labor. That means, among other things, that a material supplier is NOT a viable lien claimant.